Will bitcoin ever be used for gas pumps, parking meters and pool tables?

Last week, we spoke to someone who wants to sell a bitcoin-enabled washing machine. The conversation started a little tongue-in-cheek. If nothing else, we thought, the story would at least make for a funny headline about money laundering. But it ended up raising an interesting question: Will bitcoin ever be laundromat-ready?

When we say ‘laundromat ready’ we’re not talking about just washing machines, but rather, any machine that takes small amounts of coin for an immediate product or service.

Bitcoin payments occur mainly online these days, and when a physical business such as a pub decides to take payments that way, it makes the headlines. Yet for the person on the street, being able to pay simply and easily in bitcoins every day, physical transactions will be a key part of market acceptance.

Morgan Rockwell, a 'maker' who likes to tinker with hardware, wants to accelerate the adoption of bitcoin by using it to replace not just medium-sized transactions, such as a bar tab, but those high-volume, low-value transactions normally fulfilled with small change.

Everything from vending machines to pool tables, gas pumps, and parking meters are on his list. “My intention is to replace the paper bill loader/feeder - the little machine that sucks in your dollar at he arcade, or the vending machine,” he says.

“I want a crypto version of that.”

Getting bitcoin adopted in this space would be ideal, says Vinny Lingham, CEO of Gyft. He has a lot of experience converting physical transactions to digital ones. In May, he began accepting bitcoin payments for his loyalty cards, which are accepted by popular retailers.

“People need to be comfortable having a small stash of bitcoins. What this is kind of fits that mould,” he says of the Bitwasher project. “Everyone should walk around with 1-2 bitcoins that they can use for small transactions only. If enough people are doing that, then the volality of currency goes down and the value of the currency increases.”

Rockwell’s ethos is an interesting mix of anti-large bank sentiment (he owns the domain uscryptobank.com and simply wants companies like J.P. Morgan to "go away"), and straightforward pragmatism. Removing physical cash from this class of transactions carries numerous benefits, he argues. It can reduce insurance burdens, by removing the amount of cash needed for storage on-site.

He is also interested in getting bitcoin into the broader business ecosystem. His company, Bitcoin Kinetics, hopes to launch turnkey businesses for people wanting to deal exclusively in bitcoins.

But for now, he’s focusing on replacing low-value physical transactions with bitcoins. His invention is a device that can be made to turn a machine on and off by accepting crypto currency payments. He has launched a BitcoinStarter campaign to put one inside a washing machine to make it take bitcoin payments. He’s calling it the Bitwasher.

Bitwasher - The Bitcoin Washing Machine

The idea, he says, is to build a demonstration unit that he can then use to garner further interest in the project. But bitcoin-enabled washing machines are just an example of what he wants to accomplish. He would like to see many more high-volume, low-value physical transactions switch to bitcoin.

Getting bitcoin into that realm would be an uphill battle. Let’s start with the technical challenges. One of the biggest is that large numbers of small transactions could bloat the block chain.

“I'd have to make an off-chain payment server system,” Rockwell says, adding that he’d consolidate all bitcoin payments made for the day and then put it on the blockchain at the end.

Another potential problem is confirmation times. The bitcoin network takes 10 minutes on average to mine a transaction, confirming it in the block chain. In the past, designs for proposed bitcoin ATM machines included a 10 minute wait time when making a transaction. That won't fly when plugging a parking meter or buying a Coke. Instead, laundromat-ready bitcoin transactions would have to rely on zero confirmation. This is common in the bitcoin world, though.

“There is the risk of an attack, but at that micropayment of a dollar, the risk is extremely low that someone will try to falsify payment,” Rockwell says.

Technical challenges like these could be overcome. But the biggest challenges are economic, and cultural. And Rockwell’s invention is far from scalable in its current form, built as it is on an Arduino (a hobbyist open source prototyping platform for electronics projects). He would have to miniaturise it on a circuit board, and get manufacturers to install it in their machines en masse. Or, more realistically, patent and license the technology.

But that’s not going to happen right now. Firstly, Rockwell isn’t applying for patents – he’s trying to raise 25 bitcoins to buy a nice-looking washing machine. Secondly, and more problematically, bitcoin faces a catch-22 situation.

“This will work when people have wallets with bitcoins. People don't,” says Lingham. “We have hundreds of thousands of users. None of them know what the hell bitcoin is,” he continues. “The bitcoin community lives in its own bubble.”

Until customers use it, vending equipment manufacturers, arcade machine vendors and so on would have no reason to make the investment in building this into their equipment. But until they see a barcode on their local Coca Cola machine, people won’t bother using bitcoin. There’s an incredible inertia in metal money.

Moreover, there are well-established alternatives to physical transactions at this level anyway. Google Wallet in the US vies with initiatives like Visa Paywave and MasterCard PayPass for low-value contactless payments. Parking meters are already sewn up. Verrus is one company enabling cell phone-based payments for parking meters. Many municipalities will be far more comfortable working with established technologies like these, than with bitcoin, and for most of them, the work to install mobile parking meter payments has already been done.

The problem is that we’re putting the cart before the horse, Lingham argues. Most transactions still happen online. “What we need to do is to get people to start using bitcoin for microtransactions on the web.”

If you install a bitcoin-enabled washing machine in a laundromat in San Francisco, no one would use it, says the Gyft founder, who is also on the board of BitAngels, which invests in bitcoin-friendly projects.

Rockwell’s answer is to begin seeding friendly environments with these things. He said that he is talking to people on the Intel campus just down the road from his Portland home about installing bitcoin-enabled high-volume transaction devices on their premises. It does seem likely that if this kind of thing was going to make inroads anywhere, it would be in sympathetic tech campuses to begin with, in the same way that, for example, SIP gained traction as a Voice Over IP mechanism inside large companies who saw the value in it.

A laundromat-ready bitcoin would be a great thing for driving up cryptocurrency adoption, driving down volatility, and moving from a speculative economy to one where it is actually used in volume. But before we see this happen, there are several steps along the road first – and most of them will take place online.